Saturday, April 21, 2007

Is herd mentality really bad?

In his post titled "Herd mentality and Indian startups", Pranav cites some interesting examples of how almost every successful internet model (mostly in US) is quickly flooded with their indianized me-toos. While I do think Pranav is being harsh on budding entrepreneurs (you can argue that his blog itself on indian startups and entrepreneurship shows herd mentality given the many that appeared before him - try webyantra, ileher, business india 2.0); he does raise an interesting point.

Why is this happening? Lets dig a bit deeper.

First off, I don't think herd mentality is bad - I think its terrific. There is no bigger motivation than trying to replicate a proven business and success elsewhere, and its this drive that takes people through all the hard work and no money phase of a startup. And its not any different from how other things in life work - doesn't almost everyone want to be a sofware engineer right now? isn't every Bollywood movie a love story? do we really need a 100 different types of car models to choose from? But if its a formula that has worked for someone else, then why not?

Secondly, the idea in itself has no meaning. Its all about execution. If ideas is all that's needed, all VCs would be billionaires and all B-schools would be selling ideas, not degrees.

Third, and most importantly, almost all web 2.0 startups are a product of software engineers. They build great technology, decent interfaces and then just hope for traffic. What happened to marketing? Ask them and they will you - "Aah, that's not a problem at all. We'll get blogging coverage, buy google keywords and its all going to be viral". Good luck to these guys! Think about marketing first. People don't need 8 photo sharing sites and 6 DVD sites. But they do need one. How do you get to them first? How can you make them remember you forever? It's all about marketing, baby! Product is a distant second.

Finally, its all about economics. The field will become even in the long-run. If a business is easy, cheap and profitable - then it will get competitors. Ultimately, all markets get reduced to a few handful quality companies. Its just a matter of time.
Figure out how you can make your business difficult and profitable. Thats what gives you unfair advantage. Don't look at how google got to where it is - look at where they are and how difficult or impossible it will be to displace them. Its f***'ing scary...

Ask this. The internet population in India is 38ish million.
a) Are all of them taken? The answer is probably yes for social networking and matrimonial sites, but definitely not for DVD rentals
b) Is there a reason they have to be loyal to their current brand? Again, given how much time they have invested in their site, this is a yes - for social networking sites. For photo sharing sites and travel - probably 'no'
c) Is the cost to switch them over to me too much? matrimonial sites - may be ( I say may be because what if you mareketed your product to 17-year olds? They will be ready in 5 years and they will only come to you). DVD rentals - should be easy! Travel - even easier.

Like it or not, I think there is still room for a few more sites in a few of these categories।